The China Insurance Regulatory Commission (CIRC) announced last week that, going forward, Chinese insurance companies that have attained its approval will be able to allocate up to 10% of their total assets to private equity, including private equity funds and direct private equity. Prior to this, approved Chinese insurance companies were only able to invest up to 5% of their total assets to the asset class.
While the actual timeline for converting any approvals into new investments has yet to be confirmed, CIRC’s move is welcomed by both Chinese insurance companies and fund managers seeking to raise CNY-denominated funds. Chinese insurance companies will have more flexibility to explore various investment options, and private equity fund managers will be able to fundraise from a larger pool of capital. Insurance companies form an important investor type among institutional private equity investors, which also includes firms such as pension funds and endowments.
Insurance companies investing in private equity funds (excluding funds that focus on real estate and infrastructure assets) account for only 4% of China-based investors. Preqin currently holds data on 85 institutional investors in China, which represent a collective pool of $3.8tn in assets under management. A domestic insurance company that Preqin recently spoke to highlighted its interest in seeking new private equity commitments over the next twelve months. It is willing to invest in both direct funds focused on buyout and growth capital strategies and funds of funds. Additionally, the asset management arm of another China-based insurance company is looking to soon make its maiden commitment to private equity, and is interested in buyout and growth funds. Chinese insurance companies are not allowed to invest in venture capital funds and low-technology focused funds. While insurance companies have yet to gain approval to invest in offshore private equity funds, they are hopeful about future regulatory changes and are willing to consider offshore private equity funds in the future.